Much less for Extra in Turkey: Pricey Meals Ravenous Financial Restoration By Reuters
© Reuters. Women shop at a local market in Istanbul
By Ezgi Erkoyun and Jonathan Spicer
ISTANBUL (Reuters) – Groceries have gotten so expensive in Turkey that some people are spending the money they need on rice and pasta to avoid even higher prices in the coming months.
Parents have switched to cheap baby biscuits, the cost of eggs has almost doubled in a year, and a mock photo is circulating on Twitter of a man with a bent knee offering a woman a can of cooking oil instead of an engagement ring.
“We only buy the absolutely necessary and cheapest brands out there. All food prices are rising, but especially baby food,” said Huseyin Duran, 43, an Istanbul father and security officer of three who receives partial state pay for lost work.
“I’m worried about my children,” he said. “We can only pay our rent, groceries, and loan payments.”
In a world with near-zero inflation and the economic impact of the coronavirus, Turkey is characterized by an annual rise in consumer prices of 15%, which is second only to Argentina among emerging markets and by far the highest in the OECD.
Rising oil and fertilizer prices and dry weather are part of the reason food inflation has soared more than 20% in one year. But economists also point to government decisions that saw the lira drop to lows last year and increase food import costs by around $ 9 billion.
Turkish President Tayyip Erdogan has reluctantly accepted sharp rate hikes that will slow economic recovery just as COVID-19 vaccines are rolled out.
Given polls showing pantries are getting thinner, Erdogan may need to do more to address the basic cost of living, even after the appointment of a new central bank chief who pledged to tame inflation in November.
A policy maker told Reuters the government anticipates difficult inflation in 2021 and needs to be monitored.
Turkey is in painful stagflation even amid coronavirus curfews and high borrowing costs, said Yesenn El-Radhi, senior sovereign analyst at Capital Intelligence Ratings.
“Inflationary pressures remain high due to the recent hike in global commodity prices and a delayed effect of the sharp depreciation of the lira,” he said.
LIGHTER SHOPPING BAGS
A trip to the market where eggplant, orange and sunflower oil prices have increased more than 50% in the past year is a serious burden for the Turks, along with the pandemic that has already weighed on workers and incomes become.
“Every time I fill my pantry, the shopping bags get lighter, but the bill gets higher,” said Pinar, 31, who refused to give a surname. “I buy in bulk so I don’t have to shop for three or four months.”
Pinar is a cook on leave and receives part of her salary under a ban on dismissal, which she believes only covers rent and utilities. “I’ve had many sleepless nights (and) in the end I think I’ll be unemployed.”
Hyperinflation haunted Turkey in the 1990s and only ended with an International Monetary Fund program to tame prices when Erdogan came to power in 2003.
Inflation, led by food, rose again in a 2018 currency crisis and has remained largely in double digits since then. Economists blame chronic trade imbalances and costly government foreign exchange interventions that depleted reserves.
A Metropoll poll last month found that 80% believe inflation is higher than the official balance sheet. A separate survey by the Deep Poverty Network found that more than half of respondents in Istanbul were dependent on food from the community.
Kemal Kilicdaroglu, chairman of the Opposition People’s Republican Party, said the situation was getting worse. “There has never been hunger in Turkey. But now hunger is a reality.”
In a turnaround, Erdogan said in November that even “bitter pills” like high rates are needed to cool prices. Lutfi Elvan, his new finance minister, said he would take structural steps to fight inflation, which is expected to rise by April.
The government has several levers that it can use to reduce pressure on the public. Ankara has already cut taxes on tobacco, which weighs heavily on the consumer price index (CPI), although it has increased alcohol tariffs and road tolls, which have less of an impact on headline numbers.
Government agencies also set prices for utilities such as electricity. Last month, the government increased the 2021 minimum wage by 16% net to 2,825 liras (USD 377) per month, which benefited workers as well as the headline CPI.
“You cannot solve the food problem with interest rates,” said Gizem Oztok Altinsac, chief economist of the top Turkish business organization TUSIAD, at a conference last week.
“Our inflation problem is too big, so we need to take more focused steps to solve it.”